Abstract
Abstract Local governance in developing countries demonstrates many problems related to financial sources and good governance of their finances. Local Self-Government (LSG) units in the Republic of North Macedonia are very small which results in a lack of capabilities to raise enough funds to offer delegated services. The local government in the Republic of North Macedonia centralizes almost all public finance. Local budgets depend heavily on state transfers and donations from the central budget. The lack of funds remained a crucial problem even though there were some attempts for the decentralization process. Practically, governments in many of the local governments in North Macedonia could not secure their resources. In this way, they could come with specific charges, but all taxes are decided by the central government. The practice showed that local governments before borrowing needs to be approved by the Ministry of Finance. The Republic of North Macedonia as a potential candidate to join the European Union should make several changes regarding the legislation during the process of accession to benefit from being a small candidate country. The main aim of this paper is to investigate alternative financial sources such are Municipal Bonds, Partnership Sukuk securities, and PPP. Unfortunately, many financial alternatives have not been able to be implemented due to failures in reforms and good financial governance. But they remain an open opportunity for developing a local government in the future.
Highlights
The process of fiscal reforms, in the Western Balkan countries with special emphases on the Republic of North Macedonia, was conducted in unfavourable socioeconomic and political circumstances
The objective of this research is to offer an overview of opportunities for financing the Local Self-Government (LSG) with alternative financial sources such as Municipal bonds, Partnership Sukuk securities, and Private Partnership (PPP) in addition to institutional resources of financing
The decentralization and especially fiscal decentralization in the Republic of North Macedonia, in general, was a very complex process and passed with crucial political reforms with high risks to economic and political stability that in a certain case resulted even in interethnic conflicts in the year 2001. This process in most cases has been supported by the EU and international institutions but the process of fiscal decentralization during the transition period of the Republic of North Macedonia has been very politicized and characterized by permanent inter-ethnic strained relations
Summary
The process of fiscal reforms, in the Western Balkan countries with special emphases on the Republic of North Macedonia, was conducted in unfavourable socioeconomic and political circumstances. The reforms of fiscal decentralization should assign fiscal decisionmaking powers and management responsibilities to local government while transferring adequate sources of financing. The experience of many transition economies shows that adequate revenue nonavailability leads to inefficiencies of public services and causes the failure of local government such are municipalities. One of the crucial problems that local authorities face in managing public finance is the lack of coordination including the planning of public budgetary revenues and the implementation of the plan. The process of fiscal consolidation, in general, is a very complex process that depends on many endogen and exogenous factors and determines the success of fiscal reforms on the local and central levels (Mazllami & Osmani, 2016). The objective of this research is to offer an overview of opportunities for financing the LSG with alternative financial sources such as Municipal bonds, Partnership Sukuk securities, and PPP in addition to institutional resources of financing
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